Oil extended losses to trade near a 12-year low as crude stockpiles at the delivery point for New York futures expanded to a record even as nationwide supplies slipped.
West Texas Intermediate fell as much as 4 percent after dropping 15 percent the previous five sessions. Inventories at Cushing, Oklahoma, the biggest U.S. oil-storage hub increased by 523,000 barrels to 64.7 million last week, according to government data. The site has a working capacity of 73 million barrels. WTI’s contango between prompt-month delivery and a year later was near the widest in a year.
“It’s still a risk-off environment,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. “WTI is suffering from record-high stocks at Cushing. It’s falling more than Brent to prevent stockpiles there rising even more, because a wider spread should result in increased demand for local crude in the Cushing area at the expense of imports.”
Oil is down 27 percent this year on speculation a global glut will persist amid the outlook for increased exports from Iran after the removal of sanctions and brimming U.S. crude supplies. The nation’s stockpiles are still more than 130 million barrels above the five-year average, even after dropping by 754,000 barrels, according to Energy Information Administration data.
Oil Output
WTI for March delivery dropped as much as $1.10 to $26.35 a barrel on the New York Mercantile Exchange and was at $26.44 at 11:35 a.m. London time. The contract slid 49 cents to $27.45 on Wednesday to the lowest close since Jan. 20. Total volume traded was about double the 100-day average. WTI declined 30 percent last year.
Brent for April settlement declined as much as 59 cents, or 1.9 percent, to $30.25 a barrel on the London-based ICE Futures Europe exchange. The contract added 52 cents to $30.84 on Wednesday. The European benchmark crude traded at a premium of $1.33 to WTI for April.
Traders are looking again at using supertankers as temporary storage facilities to profit from a market structure known as contango, when prices of oil for delivery today are lower than those in future months. The difference between WTI futures for March delivery and one year later was $12.04 a barrel, the highest in almost a year.
U.S. crude production declined by 28,000 barrels a day to 9.19 million a day through Feb. 5, dropping for a third week, according to an EIA report Wednesday. Imports fell 13.7 percent to 7.12 million barrels a day, the biggest decrease since December 2014, the EIA said.
Venezuela has lobbied Russia, Iran, Saudi Arabia and other producers to arrange a meeting between members of the Organization of Petroleum Exporting Countries and non-OPEC states in an attempt a global agreement to restore balance to an oversupplied market. Rosneft will supply its traditional markets with oil in a “competitive battle,” Chief Executive Officer Igor Sechin said in London on Wednesday.